Institutional Economic Theory Research Articles

Retailer use of a professional social media network: Insights from franchising

The adoption and use of a professional social media network by franchise chains is the focus of this paper. We draw on resource-based theory, institutional economic theories of incentives and externalities and multidisciplinary literatures on franchising, innovation adoption and interorganizational communication to link (i) franchisor characteristics and partnering strategies to the adoption and use of a professional social media network and (ii) the extent of use of this network by a franchisor to the number of followers of its network page. Hypotheses are empirically assessed using data on 500 US franchise chains from Entrepreneur’s Annual Franchise 500 for 2011, content analysis of LinkedIn pages for 317 franchise chains in 2011 and number of followers in 2015. One key finding is that franchisor adoption of LinkedIn is positively influenced by franchise chain size, franchising fees and franchisor marketing communications and negatively affected by franchise concept complexity. A second important finding is that, among franchisors who adopt LinkedIn, the extent of use of LinkedIn is positively impacted by franchise chain size, franchising fees and negatively affected by franchise chain age. A third notable finding is that the number of followers of a franchisor’s LinkedIn page in the short term is positively impacted by the extent of information about franchise chain and recruitment. A fourth key finding is that the number of followers in the longer term (2015) is positively impacted by whether the franchisor had a presence on LinkedIn in 2011 and, for these franchisors, by the number of followers in 2011.

"The Reality of the Present and the Challenge of the Future": J. Fagg Foster for the Twenty-First Century

This paper revisits J. Fagg Foster’s early assessment of the relevance of John Maynard Keynes’s theory of institutional economics. In his view, neither institutionalists nor most of Keynes’s followers really recognized the importance of Keynes’s theoretical insights. I examine Foster’s views on economic theory, with a particular focus on monetary theory. I apply Foster’s approach to what is now called modern money theory, an approach developed by heterodox economists working in the institutionalist and post-Keynesian traditions. I argue that this approach is consistent with Foster’s, and it offers a way forward to policy formation for the twenty-first century.

Time Elasticity - who and what Determines the Correct Project Duration?

Management of time and progress is a key element in achieving project success. In a classical time-cost-quality division, determining the correct duration of the project has obvious benefits and drawbacks for cost and quality. Generally, it is thought that cost increases at either end of the duration/time spectrum and similarly, quality is thought to decrease. We describe how the determination of project duration seems to fall between the various perspectives on project management. In a task-perspective, deterministic tools can calculate and predict optimal durations – but is no guarantee for success. In an organizational-perspective, the institutional economic theory may help us interpret the choices made by actors in the project tool chain – and which incentives and processes are needed. However, we present empirical evidence from the Norwegian construction industry, that reality often falls between the theory posited by either view. We propose to examine this span through a concept of time elasticity in between cost and value – where the flexibility and lack of pursuit of pace may be explained through an inherent elasticity in which cost and value is elastic within certain boundaries.

On the Qing Tributary System from the Per-spective of Transaction Cost

The Qing tributary system, which is centered on China, has been regarded as a universally acknowledged and distinguished regional order in pre-modern East Asian. This system is made up of a series of informal, formal institutions and the system of governance. Such system can get a good explanation by using the transaction cost theory of new institutional economics. It is obvious that the available literature about the tributary system rarely involves transaction cost theory; so this paper tries to analyze the Qing tributary system from this perspective and break the traditional analytical paradigm of international relations scholars, and then tries to build and sum up the two explainable models about the system of rising and recession.

The Global Drivers of Female Board Representation: A Multi-theoretical Perspective

We integrate the resource dependence and institutional economics theories to theorize and test the global drivers of female board representation on corporate boards. We examine both female board percentage (inclusiveness) and female board turnover (sustainability). Using a longitudinal panel dataset of 1071 firms across 42 countries over a 10-year period (2004 to 2013) and qualitative interviews of 25 female board members from 4 countries, we find support for our predictions. The resource dependence variable of female economic empowerment (female education and employment levels in a country) related positively to female board percentage and negatively to female board turnover. However, the institutional economics variable of female board legislative quotas related positively to both female board percentage and turnover. We also found that female economic empowerment and female board legislative quotas interacted positively and reinforced each other’s effects in predicting female board percentage but did not interact in influencing female board turnover. The qualitative interviews shed light on the underlying mechanisms of these relationships as prescribed in the two theories. Our study illuminates the importance of utilizing a multi-theoretic approach in explaining the global nature of the female board representation phenomenon.

Институциональные предпосылки формирования парадигмы экономической безопасности

The article explores the institutional paradigm shift as the theoretical basis of economic security through the prism of perception of the role and importance of social, political, economic, military or religious institutions. There were presented traditional and new consensual approaches to economic security in the context of the transition from the accumulation of forces as a tool for achieving secure coexistence of countries, peoples, businesses and citizens, to address the challenges of protecting their own economic interests through bargaining institutions. It is discussed that economic security is a way of thinking and acting, based on the ability to formulate and address the causes of the use of means of force, and in their place have come political and moral resources. Attempts were made to substantiate the thesis that in the world of competition and rivalry it is possible to avoid violence. The author proceeds from the position that within some societies and in international relations, where different nationalities divided by borders and among peoples, where they live in the same state of different nationalities, dominated by violence because there is no idle or institutions of morality and morals. There were reviewed the scientific origins of the formation of the paradigm of the new institutional economics and its requirements, because, obviously, it must be accepted by consensus of most researchers and should not be questioned, since this belief system is taken for granted and is not contrary to existing research. Through the use of the methodology of institutional economic theory analyzes the concept of scientific research programs, the structure of which is allocated a “hard core” and “protective belt”. There were made the conclusion that the concept of the new paradigm of the new institutional economics can be considered as the result of all the existing views of the contemporary representatives of different schools of institutionalism, and in relation to society security is about meeting the needs of existence, survival, confidence, stability, integrity, independence, preservation of level and quality of life within certain society. Economic security is defined as a process that requires the continuous activity of individuals, businesses, communities, states and international organizations for the economic state security.

The Comparative Governance of Collective Action

We examine the question of how collective action is best organized. Adopting a comparative institutional approach, we contend that the organization of collective action will incur transaction costs of discovery, bounding, adoption, enforcement, and probity, and discuss the antecedents of these costs. We then consider the relative efficacy of alternate governance forms in minimizing these costs, arguing that discovery costs are lowest under for-profits, probity costs under non-profits, adoption costs under collectives, and bounding and enforcement costs under the state. These arguments are used to develop a theoretical framework defining the optimal governance arrangement for any collective action situation. Our study thus extends institutional economics theory to the governance of collective action, and has implications for both social welfare and the non-market strategies of firms.

The case of pharmacist prescribing policy in Israel.

Pharmacy prescribing policy in Israel has been negotiated and changed in recent years in order to improve patient treatment and access to medicines, and reduce national health insurance costs by allowing pharmacists to prescribe medications. Various stakeholders and institutions were involved in the formulation process, affecting the process while representing different motives. The complexity of pharmacy prescribing policy formulation is universal - any policy project needs, for strategic and tactical reasons, to acquire an inventory of institutions involved, identify the key players and explore potential support or opposition among them. This article uses the field (theory) of new institutional economics to explain the process of pharmaceutical institutional change and identifies the stakeholders who are involved in the reform.In the framework of pharmaceutical policies, seven models of prescribing practices are outlined, and the Canadian and British prescribing models are presented. The paper then focuses on the Israeli case and the main issues that concern decision-makers in the Israeli health system, such as inequality in access to health services and the erosion of the notion of universal health services. These concerns and the involvement of different stakeholders, such as The Israeli Medical Association (IMA) and health funds, influenced and directed the final Pharmacist Prescribing Law. After several rejections and amendments the law was passed, enabling experienced pharmacists to prescribe only to patients with a previous prescription given by a physician in the hope it would improve services to patients and reduce physicians’ workloads. Here, the topic of the new prescribing policy is introduced, using tools from the new institutional school in political economy.

In the Shadow of the State

Since Charles Tilly made the comparison between state making and organized crime, it has often been assumed that illicit markets necessarily contain parallel, coercive governance structures: mafias. I argue that some illicit markets have mafias while others do not, and identify as the source of this variation the costliness of the use of force and the imperatives of territorial control. When the use of force is too costly and there is no need to control territory to conduct business, illicit entrepreneurs will not invest in the development of mafias or use violence to protect their property. I evaluate theories of both organized crime and new institutional economics to explain the relationship between the authority structures of the state and the authority structures of illicit markets. Because mafias and their use of violence can undermine state sovereignty and public order, understanding the origins of violent mafias can inform policy choices.

Теоретические аспекты управления институциональными рисками

The article develops the theoretical and methodological base of research of institutional risks of economic agents and on this basis processes technologies of management of institutional risks of innovative activity. The authors prove the theoretical and methodological approach to research the institutional risks based on interdisciplinary and institutional approaches; offer theoretical and methodical approach to decrease the institutional risks of subjects of innovative activity and also consider the directions and technologies of decrease the institutional risks of subjects of innovative activity. It is offered to consider the general theory of risk and the statements of the institutional economic theory as a theoretical and methodological basis of the concept of institutional risk development. A generalized algorithm of institutional risks management at the level of the economic agent is presented. The following groups of methods of institutional risks decrease are considered: avoidance, insurance, compensation, localization, and distribution (dissipation) of risk. A three-level theoretical model of management of institutional risks of innovative activity is offered. Directions of institutional risks decrease of innovative activity are offered.

The Development of Corporate Governance in Toulouse 1372-1946

We document a sequence of institutional innovations associated with the corporate form over the course of several centuries in Toulouse. Shareholding companies that began in the 11th century formally incorporated themselves into two large-scale, widely held firms by 1373. In the years that followed they experienced the economic challenges and conflicts we now recognize as inherent in the separation of ownership and control. Using new and existing archival research, we show how the Toulouse firms developed institutional solutions including tradable shares, limited liability, governing boards, cash payout policies, external audits, shareholder meetings and mechanisms for re-capitalization. We examine these developments in the context of institutional economic theory and the received history of the corporation. The Toulouse companies preceded the birth of the Dutch and English East India companies by centuries. The Toulouse firms shed light on the necessary and sufficient conditions for the development of the corporate form. We show that the constellation of features associated with the corporation can appear in situations of relative economic certainty and in the context of Medieval legal code that did not require the granting of governmental approval or patent. The Toulouse firms are a unique case in which the corporation appears as a nexus of private contracts.

Informal institutions and radical ideologies under institutional transformation

Abstract This article questions one of the central postulates of institutional economic theory, i.e., that of the sustainability and purely evolutionary changes of informal institutions. To study the phenomenon of the destruction of informal institutions and its consequences, we use the tools of sociological theory, which acknowledge that a period of intensive urbanization is characterized by anomie, i.e., a lack of norms, in which traditional institutions are destroyed, while new urban institutions have not yet taken shape. We reviewed the possible reactions of communities and individuals to the conditions of anomie, including the compensatory mechanisms of ideologies. In the case of the Dagestan Republic, we show how the proliferation of fundamentalist Islamic ideology is associated with the state of anomie and the consequences to which it could lead from an institutional point of view. The analysis of the situation in Dagestan is based on long-term field research conducted in the region.

The effects of institutional quality and diversity of foreign markets on exporting firms’ innovation

This study examines the role of the institutional quality and diversity of foreign markets on exporting firms’ innovation performance. Building on the institutional economics theory, the institution-based view of international expansion, and the literature on international diversification, this study proposes that expanding into a foreign market with well-developed institutions helps exporting firms improve innovation performance and that a high degree of institutional diversity of multiple foreign markets positively influences firm innovation. The study also suggests that institutional diversity weakens the positive relationship between institutions and firm innovation. The findings provide support for the proposed hypotheses. Implications for both theory and practice are discussed.

THE EMPLOYMENT STRUCTURE OF COOPERATIVE BANKS - A TEST OF INSTITUTIONAL HYPOTHESES

We study the claim that, because of their institutional design, current cooperative banks differ in their employment decisions compared to other conventional banks. The success of cooperative banks in the past was grounded on efficiency advantages generated through peer-monitoring, social sanctions, and institutional trust. Institutional economic theory and anecdotal historical evidence suggest that these core institutional mechanisms also had an effect on the employment structure of early credit cooperatives. By examining the employment structure of current cooperative banks, we aim to provide insights to the question of how and to what extent original institutional mechanisms of credit cooperatives may still be functional. We use administrative establishment data from Germany and compare employment structures of banks by legal form. The results indicate that cooperative banks in comparison with otherwise similar private and savings banks are characterized by more stable employment, an older workforce, more extensive training activities, and a more homogeneous composition of employees.

Riding Instructors, Gender, Militarism, and Stable Culture in Sweden: Continuity and Change in the Twentieth Century

Equestrian sport underwent significant changes in Sweden during the twentieth century, from being connected to men and the army to being associated with women and leisure activities. Previous research has shown that a stable culture with masculine military norms still exists in spite of these changes. The purpose of this study is to explore why these norms continue to influence Swedish equestrian sport. Institutional economic theory and gender theory are used to explain continuity and change in stable culture. The source material consists of interviews and document analysis. An important finding is that military norms have been reproduced in the education of the riding instructors.

Metrological Harmonization as a Contributing Factor to the Development of Commercial Exchange in the Mediterranean Towards the End of the 2nd Century B.C.: The Case of the Athenian Decree on Weights and Measures

The athenian decree on weights an measures from the end of the second century B.C., IG II² 1013, is an often quoted, but rarely examined in more depth source of antique legal history. This is especially true from a legal and/or economic historian's point of view; the research conducted so far is predominantly epigraphic, metrological and numismatic. At the same time, analyzing economic aspects of antique history, particularly legal history, is becoming more and more prevalent. Douglass North's theory of New institutional economics has been of particular influence in this regard.This paper examines § 3 of the decree, where the use of a new measure of volume is ordered, and especially § 4, where the market weight of the mna emporike is reformed, i.e. incremented by 8.7%, in an attempt to clarify its legal aim and purpose as well as its possible economic implications. So far, the introduction of these alterations has been viewed and discussed by some historians mainly as a question of confrontational economic policy, i.e. if the decree was enacted following political pressure from the increasingly dominant Rome, or rather a protective measure by Athens against presumably fraudulent roman businessmen. Examining and recalculating the relation among the then prevalent weight units of the roman pound, the athenian mna and the roman and athenian talent before and after the enactment of the decree, it is argued that this law led to compatibility through an easy convertibility among these units, thereby facilitating commerce not only among Rome and Athens themselves, but between all territories familiar with either notation throughout the Mediterranean, reducing transaction costs as defined by North in the theory of New institutional economics. Taking into accounts Norths statement that measurement costs [...] are the sources of social, political and economic institutions the interpretation of the athenian decree on weights and measures in a protectionist manner of Rome against Athens is contrasted with the proposition that it might be better understood as a pragmatic and sound business regulation achieving early harmonization by standardization, which all parties involved were benefiting from.

To what extent do some fundamental concepts of New Institutional Economics help explain the governance phenomenon?

The paper is an attempt to describe synthetically the relationship between the New Institutional Economics theory and the problem of governance research. The undertaking requires, without doubt, an in-depth research and extensive analysis, taking into account the various concepts developed by New Institutional Economics, and above all used to analyze the phenomenon of governance. Of necessity, the present paper is a far incomplete analysis of the problem, but allows one to present the basic commonalities and differences between the logic of economic analysis and its subject – which in this case is governance. For the purpose of this text, we define governance in accordance with the model of network governance as put forward by Leach et al. (2007).

Предпосылки экономической социологии права в работах классиков социологии

Economic sociology of law is an approach within the new economic sociology that emerged at the end of the twentieth century. Since there are well-known traditions of studying law both in sociology and in economic theory, economic sociology of law needed to justify its development as a distinct subfield. First, the sociology of law is based on essays written by Marx, Durkheim, Weber, Parsons and Foucault. During the second half of the twentieth century researchers started to conduct empirical legal studies. Legal pluralism and legal realism were the main drivers of the development for a new approach. Many papers that were published during the second half of the twentieth century demonstrated research on law and society through empirical legal studies. At the same time economic theory saw the development of law and economics. Posner (Chicago School) and Polinsky (new institutional economic theory) are the key figures in the field of law and economics. Sociological empirical legal studies do not focus primarily on economic issues and economic researchers commonly ignore social context. That is why the economic sociology of law started to develop at the end of the twentieth century. The economic sociology of law is based on essays written by Weber and Polanyi that describe the connection between law and economy. Contemporary researchers also focus on symbolical struggles between different interest groups in courts. The concept of embeddedness is very fruitful for studying the realization of market actors’ interests when economic actions are regulated by law.

Institutional economic theory of assets privatization and nationalization: Basic imperatives

Basic provisions, principles and criteria of institutional theory of privatization - nationalization and assets management in economy are introduced. Structural analysis of property, in the aspect of it s two basic elements, public and private property, is carried out and the model of interaction of public and private sectors is introduced. The main attention is focused on the efficiency estimation criteria of the functioning of property and to expediency substantiation of property privatization and nationalization. The optimum principle of property structure in economic system is suggested. peculiarities of privatization and nationalization in economic systems are analyzed proceeding from substantiation of theoretical criteria of privatization and nationalization in economy.

A NEW INSTITUTIONAL ECONOMIC THEORY OF PROJECT MANAGEMENT

The theories of project management are not well developed despite the existence of extensive literature on the topic. This paper derives a New Institutional Economic theory of project management. It is suggested that project management encompasses both the discipline of operational management and that of economics. The operational management part deals with optimization of project processes. The basic postulation of the economic part is that human beings will maximize their benefits under constraints. Constraints are converted to either price or cost to facilitate the application of the law of demand. Three examples are used to demonstrate how refutable hypotheses can be derived when changes in constraints lead to changes in behaviours. The functions of project management are discussed in the contexts of this theoretical framework. A synthesis with existing theories is also given.